High-Tech Firms Get Small-Town Benefits

A dusty gravel driveway leads to an old house once occupied by an Appalachian family. Next door is a little shack that sells hot dogs and ice cream, and a few miles away is a series of coal processing plants.

From the outside, the house looks like any other in the coalfields of eastern Kentucky. But inside, industrial cubicles sprawl across a well-worn hardwood floor, placing uniformed programmers and high-speed computers within arm's reach of an antique fireplace.

This is the headquarters for DataFutures Inc. -- a $5 million company that makes software to track school finances and lunches for school districts nationwide, but chooses to operate in 2,050-population Harlan.

"The thing about technology is you can do it from anywhere," said Charleen Combs, CEO and co-founder of DataFutures.

Experts say Combs' viewpoint is becoming more common among young professionals and high-tech entrepreneurs, many of whom are ditching the big-city scene and taking advantage of the lower costs and comforts typical of rural towns.

"Anecdotally, I really believe it's a trend," said Lawrence Gelburd, an independent consultant and lecturer on entrepreneurship at the Wharton School of the University of Pennsylvania.

"The costs are so much lower in these rural areas," he added. "The value that they get, the pace of life and the ubiquitous nature of technology makes rural areas more attractive."

The employees at these rural businesses are a mix of local hires, often college graduates who don't mind working back home, and professionals who are tired of traffic and high costs associated with working near big cities.

"Just from the big picture, there is a culture shift in professional life that makes working and residing in a rural area," said Mark McElroy, vice president of operations and communications for ConnectKentucky, an alliance of Kentucky leaders in private industry, government, and universities. "They want a healthy family life and a financially feasible career source."

Combs, of Ohio, drifted into her husband's native eastern Kentucky nearly 30 years ago to be closer to family and raise her children with the unpretentious values of the mountains. In the late 1980s, the young computer programmer joined forces with a family friend to start DataFutures, which initially limited its clientele to a handful of Kentucky schools.

But with help of the Internet and video conferencing tools, DataFutures counts more than 3,500 schools in 40 states as software clients. Combs said that despite its success, DataFutures has no plans to move into a busier metropolis.

Her clients can meet with DataFutures executives via video conferencing, and most simply download the software and training materials online.

"There's a new generation of entrepreneurs who have really tight relationships virtually," said Cornelia Flora, distinguished professor of sociology at Iowa State University and director of the North Central Regional Center for Rural Development.

Flora said networking face-to-face in populous cities used to be the only way to establish valuable business contacts. However, the Internet and video conferencing today allows business chiefs to meet potential clients from any office -- from a high-rise in Manhattan to a mountain home in Appalachia.

Mike Mallet, founder and CEO of Corporate Research International, said his turning point came one day in Washington, D.C., when the market researcher sat in traffic for three hours. He decided to move his family and his ideas to his hometown of Findlay, Ohio, population 39,000.

Mallet said businesses in rural areas have a main advantage: lower costs.

"The business sector has changed completely," said Mallett, whose mystery shopping company plants undercover consumers to evaluate retail services for his some 200 clients nationwide, including Foot Locker Inc., Darden Restaurants Inc.'s Hardee's chain and Dunkin' Donuts. "The Wal-Mart mentality has changed the world. It's all about cost now."

Entrepreneurs like Combs and Mallett enjoy office space that comes at a fraction of the leasing costs in big cities. The cost of living is less, so wages are lower, yet still appealing to their employees. And, with hardly any traffic, there's less money wasted on high gas prices and less stress among employees.

Smith, whose clients include billionaire Bill Bartmann and actor Burt Reynolds, said his biggest selling point clients are more concerned with his getting the same level of publicity they would with slick, big-city firms at a fifth of the cost.

Since their costs are lower, they can offer the same services at a cheaper rate than companies in big cities.

"Because our overhead is so low, our prices reflect that," said Robert Smith, head of RSA Public Relations, based in Rockton, Ill. -- a town of 5,500 about 95 miles northwest of Chicago.

But operating out of the rural areas has its challenges, too, namely accessible airports.

"The biggest challenge for us is travel," said Combs, whose Harlan, Ky.-based company is three hours from the nearest major airport and two hours from an interstate. If the client is 10 hours or less away, Comb's sales representative drive.

She and the other business chiefs interviewed said they rely heavily on Webcasts, teleconferencing and videoconferencing to make routine presentations to clients. They try to keep long-distance travel at a minimum, usually for business pitches and semiannual or quarterly visits.

Some, like Smith, plan vacations around visits with his clients.

There's also an image issue.

Smith said he can get his clients the same level of publicity they would with slick, big-city firms at a fifth of the cost.

He just has to overcome the "cornfields" first.

"There's this false sense of security. A lot of them think they want someone in the big city," Smith said. "That's not as important as it used to be. They see that we're just one phone call and one e-mail away from the same people.

"Why pay $10,000 for that when you can get it for $2,000?"

Overcoming stereotypes appears to be the main hurdle for rural businesses, though it doesn't seem to hinder their success, Gelburd said.

"Image definitely plays a role," he said. "But in terms of a technology company or these other business, those things tend to erode.

"For businesses, they're just looking at the bottom line. If we're going to get the same results, those attitudes seem old-fashioned and inappropriate."